Quarterly Report – July 2020

2020 is and will be remembered as an extraordinary year - from a health as well as from a market point of view.

Following two tough years for recovered paper and board characterized by high stocks and hectic pricing, 2020 seemed at first sight to suggest a change was about to take place. Early in the year, demand improved slightly and stocks fell a little. At that point, we could have reasonably hoped for prices to increase from the spring and/or summer.

However, everything started to happen much faster with the onset of the COVID-19-crisis and the resulting lockdown. With most industries shutting down in France, our domestic collection rate fell by 50%; all our recycling facilities remained open and so we managed at first to meet the demand, but at a slower pace of activity.

Paper mills’ demand remained high and soon it became almost impossible to satisfy it.

Within two months, prices surged and our stocks returned to reasonable levels, but conditions changed quickly once again with the mid-May lockdown easing measures. Between March and May, our paper mill customers had generated a lot of product and, eventually, a significant proportion failed to find sales outlets and ended up in stock.

There is still intense pressure on the market for reels: prices have been falling and mills have started to announce a demand drop of 10-30% for the summer. With the easing of restrictions, collection has returned to normal but we now face a lack of demand. June was complicated by low demand from the mills and by prices going down - and July will be complicated too. Our recovered fibre stock levels are becoming high once again.

Regarding the lower grades, Europe has witnessed reduced demand in June and July. However, the decrease in prices has opened up the possibility of exports once again: we’ll have to call for containers this summer and see what happens after the holidays.

For the middle grades, volumes have also decreased but our customers are seeing a shortage of demand for newspapers and magazines as well as for tissue products. As expected, the UPM Chapelle d’Arblay facility in France stopped operations in June; no-one has taken it over to date but, though closed, the plant will be maintained by UPM for a year to improve the chances of an eventual resumption. The office papers market is satisfactory but volumes have decreased owing to more home-working. Good levels have been maintained among the high grades but, despite some pressure, there is not much more available to offer.

So this year so far has brought a roller-coaster market: we started with high stocks and low prices, the reverse applied in April/May, and now the markets have been turned upside down once again. What can we expect in the second half of the year? All will depend on how the COVID-19 crisis develops.

Activity levels appear to remain acceptable, with some industries and sectors suffering more than others. If this trend continues, then demand could return in Europe as well as in Asia.

New cardboard capacities in Germany, Italy and Turkey should help sustain demand for recovered fibre.

To end on a positive note from France, Norske has just announced a major investment at its Golbey site where, by 2023, more than 1 million tonnes of test liner and newsprint is to be produced annually from recovered fibres.

Jean-Luc Petithuguenin - Jean-Luc Petithuguenin (France)

Jean-Luc Petithuguenin

Paprec (FRA)

Quarterly Report – July 2020